HIGHLIGHT

Austin Texas has what it takes to be the next silicon valley

Austin, Texas, a.k.a. Silicon Hills, is emerging as a viable alternative to Silicon Valley. Major tech brands and startups alike are finding it a great place to call home.

Overview

Where is the next Silicon Valley? In the hills of Texas, 1500 miles to the southeast. Known by many in the industry as Silicon Hills, Austin, Texas is rapidly becoming the location of choice for tech companies. State government officials estimate that one-third of the companies now moving to Texas originated in California.1 For Austin, this translates into substantial growth -- 8.1 percent in the city’s tech sector in 2012, to be precise, with nearly 2,600 tech companies providing 50,000 local jobs.2

Key Findings

Austin is a hotbed for both big brand tech companies and startups. In addition to long-term resident Dell, well-established players like AMD, Apple, AT&T, Google, HP, Microsoft, and Samsung have significant operations in the Texas state capital. Applied Materials, the global leader in nanomanufacturing technology for the electronics industry, is headquartered in Austin. So is Freescale Semiconductor, a leader in embedded processing solutions for the automotive, consumer, industrial and networking markets.

In addition, we are seeing that more and more companies not typically considered part of the high tech industry are recognizing the opportunities offered by Austin. In 2012, General Motors opened its first IT Innovation Center there. According to CIO Randy Mott, GM chose this location because the top computer science schools in Texas are training the type of next generation IT workers and visionaries the automaker wants to attract.3

Headset manufacturer Plantronics, long headquartered in Santa Cruz, California, is one of the most recent tech arrivals in Austin. In September 2013 the company opened an R&D office in the city, bringing with it a number of software engineering jobs.

While Plantronics has been setting trends in audio technology for more than 50 years, it is also a pioneer of wearable technology, a sector that seems to be attracting many firms. At Chaotic Moon Studios, an Austin-based mobile software firm, developers and engineers are working on eyewear that would compete with Google Glass. They are also working on other wearable projects, ranging from applications to full-blown products. Pristine, an Austin- based startup, is developing Google Glass apps for surgery.

For a company like ours, Austin’s emergence and rapid growth as a tech center has meant new challenges, including increased competition for graduates, finding housing for new hires and dealing with the morning commute!

Analysis

What’s behind the appeal for tech companies? Most significantly, perhaps, Texas offers businesses nearly $19 billion per year in incentives, the most of any state within the United States. The Texas Emerging Technology Fund, created by the state legislature in 2005 is solely focused on attracting technology research and development and commercializing emerging technology. The Austin Technology Incubator has helped more than 100 companies in the last five years raise over $250 million in investor capital.4 Universities, including the University of Texas and Texas A&M, feed Austin’s R&D as well as its tech talent pool.

Austin is also an exciting place to live, playing host to the SXSW Music, Film and Interactive Conferences and Festivals (SXSW), Formula One racing and other events. It also claims a low cost of living, especially compared to Silicon Valley, where housing prices are more than three times higher. Add to that the fact that Texans don’t pay corporate or personal income tax and the appeal of Silicon Hills is clear.

Through its casual culture and freedom to experiment, Silicon Valley grew to become the global hub for tech entrepreneurship over nearly three decades. And most executives would agree that Silicon Valley remains the tech industry’s premier location. But the Silicon Valley market is peaking and the Austin’s is on the rise. The tech sector represents only about 8 percent of the city’s economy5, leaving significant capacity for growth. It has an open and collaborative culture similar to that of Silicon Valley. It is also a biotech hub for more than 160 companies and 8,200 employees.

Combine all these factors -- significant government incentives, a reasonable cost of living, a relaxed lifestyle, world-class educational institutions and a strong labor pool -- and it is clear to us why Austin is likely to continue its ascent and assume its rightful title of Silicon Hills.

AUTHORS

Greg Andrews has been with Accenture for 27 years working within Communications, Media and Technology. He serves as the Global Account Lead for both Dell and Advanced Micro Devices (AMD) and is also Accenture’s Enterprise Technology Industry lead.

Brian Green has been with Accenture 13 years working with Communications, Media and Technology clients. He serves as the senior account manager for Dell as well as other supporting roles within Accenture’s Management Consulting practice.

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